Analysts have increased their fair value estimate for Mineral Resources from A$68.00 to A$75.00, citing updated assumptions about revenue growth, profit margins and a lower future P/E multiple in their models.
What's in the News
- Mineral Resources is reported to have started a sale process for its Bald Hill lithium mine to help secure funds to reduce debt, with interest expected in either the whole asset or a partial stake (Key Developments).
- Investment banks Standard Chartered and Argonaut Securities are said to be running the Bald Hill process, while JPMorgan is reported to be advising Mineral Resources more broadly (Key Developments).
- Potential buyers are reported to include downstream lithium operators and customers such as Korea's LG Chemical and Japan's Mitsubishi, which are understood to be assessing a possible stake in Bald Hill (Key Developments).
- The Bald Hill mine was placed into care and maintenance after a period of low lithium prices, following a strategic review, while Mineral Resources has reportedly considered other asset sales such as Wodgina where suitors did not meet its A$2,000 million expectations (Key Developments).
- Reports highlight that Mineral Resources previously posted an A$904 million annual loss with A$5,400 million of net debt, and that higher iron ore prices in recent months have eased some pressure to pursue further mine sales (Key Developments).
Valuation Changes
- Fair Value Estimate has risen from A$68.00 to A$75.00, representing a moderate uplift in the analysts’ assessment of Mineral Resources’ worth per share.
- Discount Rate has edged higher from 8.73% to 8.86%, indicating a slightly higher required return in the valuation models.
- Revenue Growth assumption has moved from 19.28% to 20.33%, reflecting a small increase in the projected expansion of the business.
- Net Profit Margin assumption has risen from 15.46% to 21.49%, indicating a sizeable step up in expected profitability on each dollar of revenue.
- Future P/E multiple has been reduced from 14.61x to 11.33x, suggesting that the higher fair value is driven more by revised earnings assumptions than by a richer valuation multiple.
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